IT Industry Welcomes Demonetization of 500 & 1000 Currency Notes

New Delhi, India, 10th Nov, 2016: The recent announcement made by the Modi government to abolish Rs 500 and 1000 currency notes has got tremendous response from Tech companies across India. While some IT leaders welcomed it with open arms, others chose to be little cautious on the government move.

On this move, Anwar Shirpurwala, Executive Director, MAIT, said, “MAIT compliments Prime Minister Modi for his action against corruption and black money and strongly supports the Government in its mission of transformation of India. We applaud the decision taken by the government to eradicate black money. The move taken by the govt. clearly indicates that we will be depending more and more on the ICT. This move has been possible because of the availability of technology and multiple means of financial transaction. This also calls for the Govt to further look for means of increasing IT penetration, thus enabling every citizen to use technology tools and services for cashless transactions. Govt. should continue to give more emphasis on technology led schemes and programs for the betterment of the economy growth.”

Hailing Indian’s Government campaign against Black Money, Paladion Networks CFO, Padmanabha Krishnamurthy said, “Withdrawing old high denomination (OHD) notes is a brilliant move by the Modi Government. It will contain the rising incidence of fake notes and black money. Though there would be some logistical issues for the common man to exchange OHD notes, on a larger scale it will serve the purpose. On the brighter side it encourages people to transact more on electronic mode payments like NEFT / RTGS / Internet banking, mobile wallets, IMPS, credit/debit cards, etc. Government and RBI should encourage electronic payment transactions by making it free of cost for the people by eliminating the transaction fees that bank charges for the electronic mode transactions. On the cyber security front, it emphasizes banks to have a more secured banking platform for its customers to do electronic transactions and increase customers’ confidence level on it.”

“In the recent past, we have seen vulnerabilities where certain bank accounts were compromised, etc. This has resulted in an increased focus and investments on Cyber Security spend from the banks, mobile wallets companies, etc. This would help facilitate the growth that we could see in the electronic mode of banking transactions in India,” added Krishnamurthy.

Welcoming the move, S Sriram, CEO, iValue infosolutions, “This is one great move by the government of India. It will serve the country on the long run. The major implications will result in faster GDP growth, inflation will fall, and products will become more affordable which will fuel the demand and further growth of the industries.

On the other hand, inflation will fall along with stronger growth. Products will be more affordable including large ticket items like housing. Once cleaned up, further generation of black money will be dramatically cut down and more transactions will happen electronically instead of cash and hence the counterfeit will reduce. There won’t be much of an impact on the IT industry as they prefer purchase and sales through banking system only.”

Rohit Agarwal, CEO at Astrum Electronics India, said, “First it was like a big shock but, in reality this is really going to be of great help to nation and its economy in long term, for short term there will be chaos and tightness in liquidity. For IT industry there is not going to be a major impact as our industry works mostly (around 90%) in bill and there is only less component of it which is in real cash, if we talk about branded materials. But those who are not selling brand and are importing material from China it will be big challenge for them as there 90% business in cash. The main issue will be at the consumer level as most of the people are buying in cash and people are not habituated to use of debit and credit card so sales will suffer in short term. This move will help brands to grow and helps in curbing the fake, grey market, and Chinese import cash sales. Most importantly, I think the way money is going to be sucked in the system there is no way to get liquidity back in the system immediately. I mean for a person who is salaried or doing his business 100% in bill he will also have a cash crunch. There should have better availability for replacing old currencies, as there is limit for withdrawal of money, which can cause trouble for common people to manage day to day expenses.”

“But, this move is designed to lock out money that is unaccounted for – known as ‘black money’- which may have been acquired corruptly or being withheld from the tax authorities. So we are flattered by this ‘Master Stroke’ to reduce corruption, black money and promotion of digital economy,” he added.

DMX India Country Head Satish Kumar V said, “We are proud of this bold decision taken by the Indian Government. The amount of planning and systematic preparation is appreciable and the daring step is worth lauding.

As per now, there should not be any major impact on the general IT sector as we have a highly structured business to deal with. In fact, this is a welcoming opportunity for the IT industry as the dependency on the banking & online transactions and, communications is set to grow exponentially. This development would help hardware / software / services players to perform smart business, maintaining a transparent track record. It is also a boost to the start-up segment that can now take the cashless transactions and related shopping / purchase related experience to new levels of comfort with their innovative platform & service idea.”

“Right now we only see the positives from this measure by the government & Reserve Bank. Firstly, this step can bring grey market commodities / illegal money lending / money laundering etc., under control which is otherwise unmanageable. Furthermore, it can alleviate the lives of our farmers, artisans and similar other sections. By actively participating in micro and rural financing through official means, they can actually come out of the clutches of money lenders & middle men.

While the demonetizing announcement with immediate effect is the highlight of the idea, the government and the banking sectors has to take the responsibility to come to the rescue of the general population to ensure minimal confusion and more normalization of day to day operations as well as facilitating industry specific needs.

Overall, the gradual transition starting with Aadhaar/ PAN/ Bank account linking, penetration of digital wallets and online services, multiple instances to declare black money followed by back end preparation of new currency will definitely bring evident changes in the governance.”

Expressing surprise, Biswas Nair,Founder and Managing Director at Inspirria Cloudtech, “I feel the sense of surprise was important for this kind of strategic action. There couldn’t have been any better way of bringing about this change. The demonetization of high-value currency is a bold and impactful change taken by the government to curb the menace of black money, corruption and counterfeit currency notes, especially a surgical strike on the so called parallel economy.

This decision will be hardly impacting businesses in the IT industry as most of the transactions are done digitally. But, certainly the largest employee base in the IT industry may feel the inconvenience in near future because of the pull out of the 500 and 1000 currency notes. We need to understand that these young employees are one of the most avid spenders too, albeit some of them have moved to debit and wallet money. The demand for digital money will eventually lead to more use of plastic and e-wallet money, providing a great boost to the e-wallet companies like PayTM and Citrus as they will drive more adoption from the fence sitters.”

“The biggest plus is that people who have this so called black money will be in serious trouble as the amnesty period is over with the IDS scheme on Sept 30 and if they declare the wealth now they pay 60% tax compared to 45% through IDS 2016. Also, the reality bubble will be over and reality as a source to channelize black money will also end bringing in parity with the realistic prices. I also hope that the security measures for these new currencies are more stringent to have any future worry of fake currency.

There would be a little inconvenience for commoners for their daily consumption for the next few weeks till the new currency comes into circulation. Also, there would be an issue with foreigner visitors who have already converted their currency into old notes and may not have much option left, though I guess they will still have their debit/credit card available for usage.. Also, there is no clarity if the Indian tourists who are currently travelling overseas can exchange these invalid monetary currencies in overseas countries.”

“We hope that the ATM’s and branches should quickly flush-up with the new currency and restoring normalcy. The media (social and traditional) were well used to communicate the information to the population at large and hope the same has been done through AIR and Panchayats to reach out to the rural audience too,” concluded Nair.

Viren Bavishi, Director, TAIT, said, “Demonetisation of the Rs. 500 and Rs. 1,000 currency notes is one of the boldest steps to curtail the parallel economy fuelled by ‘black money’ while at the same time cutting off financing of terrorist activities. For SMEs, I don’t see any major ill effects – in fact, this move would mark the onset of increased adoption of transactions through IMPS/NEFT/RTGS and mobile wallets that will bring in more convenience and transparency.”

“With GST likely to be rolled out from 1st April 2017, this demonetisation of old currency notes will complement the government’s move to ensure higher ‘tax compliance’. Strict tax compliance will help SMEs running legitimate businesses, who generally find it difficult to compete with smugglers and those dealing in contraband goods,” added he.

“While there may be hardship for a week or two, thereafter things are expected to settle down, and people in general, including businesses, would be able to get cash when needed through authorised banking channels. In the long run, this move will accelerate economic growth through the digital pipes of e-commerce and m-banking. It will make larger revenues available to government in the form of income tax collections to fund infrastructure growth and development,” signed up Bavishi.